Three stocks that could be the Chinese Google and Apple

My subscribers at TradingWithCody.com often ask me about the Chinese Internet stocks, probably because people who read me know I owned Google and Apple from their infancies. Are these guys the next Google and Apple?

Q: I would like your feedbacks on Chinese search engine stocks, such as SOHU, SINA and BIDU. Recently they have huge pullback and just want to see if it is a good time to buy now? Thanks a lot and keep up the good work!

A’s:

SOHU – It’s a Chinese Yahoo with a wireless edge to it. That is, it’s not exactly the dominant Internet play in China (that would be Baidu), but it does have enough of a burgeoning wireless business that there could be some nice upside to the Street’s estimates, which focuses mostly on the traditional Internet businesses at SOHU. With $10 per share net cash and that wireless edge to it, I like SOHU at its 52 week lows here near $60. Earnings should jump from the mid $4s to the mid $5s, giving a 20% plus bottom line growth rate. With a current forward EV/earnings ratio of less than 10x. Revolution Investment rating: 7/10

SINA – With $9 per share, $600MM net cash on the balance sheet, this stock would be very interesting to me if it were at about $20 or so. But the company will only earn $1.58 next year. And while that’s a nice growth rate on top of the $1 they’ll earn this year, that’s not enough to get me interested in this also-ran from the China Net world. BIDU is the one I’d prefer.

BIDU – As their Finance Yahoo description so modestly puts it, “Baidu, Inc. provides Chinese and Japanese language Internet search services.” Man this is a juggernaut of a company, people. Analysts like to call it “The Chinese Google”, but maybe a more accurate way of phrasing it would be to call Google, “The American Baidu”. At $138 per share and with earnings likely to go from less than $3 this year to close to $5 per share next year, the stock is deceivingly cheap. Revolution Investment rating: 7/10

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About The Cody Word

Cody Willard writes the Revolution Investing investment newsletter for MarketWatch and posts the trades from his personal account at TradingWithCody.com He is the founder of WallStreetAll-Stars.com and the principal of CL Willard Capital. Cody serves as an adjunct professor at Seton Hall University and is on the University of New Mexico Alumni Board. He was an anchor on the Fox Business Network, where he was the co-host of the long-time #1-rated show on the network, Fox Business Happy Hour. Cody, a former hedge fund manager, and his stock picks and economic outlooks have been featured on NBC’s The Tonight Show with Jay Leno, ABC’s 20/20, CBS Evening News, CNBC’s SquawkBox, Jon Stewart’s The Daily Show, as well as in the Financial Times, Wall Street Journal, New York Times, and many other outlets.